The Bull Market Hasn’t Fixed Public Pensions

Public retirement systems across the country are suffering from a “slate of problems” that the bull market has failed to repair. This according to an article in The Wall Street Journal. The article reports that “liabilities of major U.S. public pensions are up 64% since 2007 while assets are up 30%, according to the most recent data from Boston College’s Center for Retirement Research.” The following factors are cited: The dot-com bust of the 2000s… Read More

The $358 Billion Public Pension Giant and its Investing Dilemma

In March, the board of California Public Employees’ Retirement System (Calpers) approved a plan that could channel up to $20 billion into private equity startups and corporate buyouts over the next ten years—in an effort to boost returns and cover the benefits promised to its 1.9 million members. This according to an article by Wall Street Journalcolumnist Jason Zweig. “Over the ten years through June 2018,” Zweig reports, “private equity was Calpers’ best-performing asset, returning… Read More

Contrary to Pew Findings, Pension Funds Should Have Alternative Investments

An article in Bloomberg refutes the claims by a Pew Charitable Trust report that was subtitled, “Substantial investments in complex and risky assets exposes fund to market volatility and high fees.” The article states, “There are two independent assertions here, both misleading:” The first argument refers to the statement that investment in risky assets exposes pension funds to market volatility: “True enough,” the article states, “but the report documents that the amount allocated toward stocks… Read More

Pension Fund Promises Don’t Reflect Reality

“The value of investments by public pension funds declined last quarter, widening the gap between what these funds say they will earn and what they actually make,” according to a recent article in The Wall Street Journal. Each year, U.S. pension funds must estimate how much they expect to earn on investments, calculations which determine the amount of dollars that the respective government affiliated with it must channel in. If returns are high, the article… Read More

Jack Bogle Sees Rough Road for U.S. Pensions

In a Bloomberg Radio interview earlier this month, Vanguard Group founder Jack Bogle shared a pessimistic view on the future of U.S. pension funds. According to the Bloomberg account of the interview, Bogle believes that over the next decade a conservative portfolio of stocks and bonds will not be able to “meet their 7.5 percent or 8 percent obligations.” Instead, he argues, annual returns will be closer to 3 percent for bonds and 4 percent… Read More

To Bolster Returns Large Investors Will Have to Come Up the Risk Curve

Gone are the days when a conservative bond portfolio will provide a decent return. Low interest rates and a sluggish economy are forcing investors to accept higher risk to get the same returns they would have twenty years ago (by buying and holding investment-grade bonds). The Wall Street Journal recently reported that research conducted by Callan Associates, Inc. (which advises large investors)  shows that in order to make a 7.5% return today, a portfolio’s bond… Read More